Green Investment Bank publishes first annual report

Roughly six months after the U.K. Department for Business, Innovation & Skills declared it open for business, the U.K. Green Investment Bank has released its first annual report.

“We were set up to help the U.K. achieve its demanding targets for the reduction of greenhouse gas (GHG) emissions, to increase the proportion of energy generated from renewable sources, to improve the energy efficiency of U.K. businesses and homes and to reduce waste sent to landfill,” said Shaun Kingsbury, the bank’s chief executive in the report. “Our role is to be a catalyst; to bring in more private sector financing. We’re using our initial capital of £3bn to invest in sustainable projects which need our finance, knowledge and reputation to succeed. Every pound we invest must be additional, which means that we’ll only invest when a project is short of capital. Our job is to crowd-in private sector investment, not crowd it out.”

Established by the U.K. government, the GIB is operated as a for-profit, commercial organization designed to fund projects that will result in both a “green” impact and positive financial returns. A minimum of 80 percent of the investments made by the bank must be targeted towards the priority sectors of offshore wind, waste recycling, waste-to-energy and non-domestic energy efficiency. The remaining 20 percent can be used to fund projects in other permitted sectors, including biomass power, renewable heat, marine energy and carbon capture and storage.

According to the annual report, the GIB has committed funds to 11 transactions during its first five months of operating, including several biomass projects. In November the GIB made a £50 million ($77.13 million) investment in the Foresight fund and a £30 million investment in the Greensphere fund. Both funds support the waste/biomass sector. Each fund has invested in one anaerobic digestion plant to date, one planned for Dagenham and the other in Teesside. Investments made by the GIB were matched by third-party funds.

In December, the GIB made a £100 investment in Drax to support its biomass conversion. Third party funding matched the investment with £890 million, bringing the total transaction to £990 million. The project is converting three of the six generation units at Drax’s facility in North Yorkshire from coal to biomass.

GIB invested £30 million in the Wakefield waste/biomass project in January, followed by £47 million in the Gloucester waste/biomass project in February. The GIB investment in each project was matched by third-party funds in a one to three ratio. The Wakefield project involved £30.4 million of senior debt funding to Shanks Group plc.

Overall, the GIB’s current investment portfolio is expected to result in GHG emission reductions of 22,498 tons of CO2 equivalent in 2012-’13, with lifetime GHG emissions reductions of 43 million metric tons of CO2 equivalent. The portfolio is also expected to contribute 12 TWh of renewable energy to the U.K.’s 2020 renewable energy target.

Biomass accounts for 16 percent of GIB capital commitments made to date, with waste accounting for 25 percent. Total commitments made by the bank to date across all sectors equal £635.4 million, with £121.5 million in total capital invested. The annual report notes that £8.1 million in total income has been generated so far, with £6.1 million of that income deferred and £2 million recognized under the bank’s accounting policies.